Fannie Mae (FNMA) CommunityHome Choice

July 10, 2011

POSTING NOTE: Lending programs have undergone significant changes in amounts and qualification criteria in the last several years. Please check current status for up-to-date standards.

Community HomeChoice

 Building upon the success of Fannie Mae’s HomeChoice Initiative, Community HomeChoice is our newest tailored solution under MyCommunityMortgage.  Community HomeChoice – a single-family mortgage loan designed to meet the mortgage underwriting needs of low-to-moderate income borrowers with disabilities or those who have a family member with a disability – offers flexibility in the areas of loan-to-value ratios (LTVs), down payment sources, qualifying ratios, and the establishment of credit. 

Fannie Mae has also mainstreamed eligible sources of income and nontraditional credit requirements into all products in order to serve more people with disabilities.  (Lender Announcement 03-07)

According to the Census 2000, U.S. Census Bureau, 49.7 million people have disabilities, representing 19.3 percent of the population – or nearly one person in five.  Our commitment to increased housing opportunities for people with disabilities is reflected in our American Dream Commitment, a ten-year, $2 trillion pledge to increase homeownership rates and serve 18 million targeted American families by the year 2010.

For Persons and Organizations working with Peoplewith Disabilities

Organizations that serve people with disabilities can provide additional resources and services to help people with disabilities achieve homeownership. These organizations can also assist lenders in developing marketing and outreach strategies, and provide the following services:

  • support services;
  • pre- and post-purchase homeownership education counseling;
  • partnering with designated lenders to help borrowers apply for a mortgage;
  • grants to assist borrowers with the down payment and closing costs, access modifications, property repairs, maintenance; and
  • budget management.

 Community HomeChoice DU Solution

Community HomeChoice loans can be underwritten using Fannie Mae’s Desktop Underwriting® and Desktop Originator®..  The loan should be entered in DU as a Fannie 97â mortgage using the Community Lending product screens.  If the DU finding is “Approve/Eligible,” the special flexibilities of Community HomeChoice are not needed for mortgage qualification.  In addition to any other applicable Special Feature Codes, Code 325 (“single-family mortgage serving borrowers with disabilities”) should be noted.  If the DU finding is “Approve/Ineligible,” the mortgage may be delivered through DU once the lender has confirmed the information requested in the “DU Solutions” attachment to the contract terms for Community HomeChoice.  For these loans, as well as loans where the lender has manually underwritten using the Community HomeChoice terms, the lender should note Special Feature Code 222 (“Community HomeChoice”) in addition to any other applicable codes.   Nontraditional credit histories will require manual underwriting.

Eligible Lenders

Fannie Mae specifically approves lenders that offer Community HomeChoice loans.  As lenders develop their marketing strategies to reach people with disabilities, they are encouraged to work with organizations that serve people with disabilities.

 Eligible Borrowers

Eligible borrowers for Community HomeChoice are any low- or moderate-income person defined as handicapped by the Fair Housing Amendment Act.  Lenders can document that a borrower has a disability and is eligible for the Community HomeChoice product by:

  • requiring the borrower to self-identify according to the definition of disability as specified above;
  • determining that the borrower’s source of income is consistent with having a disability; or
  • by other means the lender believes is appropriate.

 Borrower’s Income

An eligible borrower’s income may not exceed 115 percent of the area median income (AMI) where the property is located.  This income limit may exceed 115 percent in high-cost areas, per the Selling Guide. For purposes of determining income eligibility, lenders shall not consider the borrower’s “non-income” sources of support, as further described below.

An eligible borrower who has a legally appointed guardian or a Supplemental Security Income (SSI) representative payee appointee, may participate in Community HomeChoice, provided they have a 24-month history of managing the financial affairs of the borrower and intend to continue to do so for the foreseeable future. 

 Determining Income Stability and Continuance

A lender must confirm that a borrower has a history of receiving stable income from employment or other sources, and that there is reasonable expectation that the income will continue to be received in the foreseeable future, usually for three years.  A lender should make the determination of income stability and continuance for all sources of income based on the required documentation for the income source as presented in the Selling Guide.  Unless there is evidence that the income will no longer be received, the lender should assume that it will continue.


All co-borrowers must sign the note and be underwritten.   In determining eligibility for a mortgage, the combined incomes of occupant co-borrowers may not exceed the AMI, except as described above.  When a traditional or nontraditional credit profile cannot be developed for an occupant co-borrower, up to 30 percent of the total qualifying income can be used toward the mortgage payment.  An occupant co-borrower need not be related to the disabled borrower.  A non-occupant co-borrower may be part of the transaction, provided the occupant co-borrower is a disabled person who meets the income restrictions, and the non-occupant co-borrower is a family member or legal guardian. 

 Eligible Mortgages

Fannie Mae accepts 30 years or less fixed-rate, fully amortizing, level payment mortgages, 7/1 ARMs and negotiated 10/1 ARMs. There is no minimum loan amount, and the maximum loan amount is Fannie Mae’s standard conforming loan limit.  Refinancing and limited cash out transactions are available consistent with Selling Guide.

 Eligible Properties

Owner-occupied single-family detached houses, townhouses, condominiums, cooperatives, planned unit developments (PUDs), and two-family properties are eligible properties.  Property inspection reports are no longer a lender requirement.

 Borrowers purchasing properties requiring rehabilitation and/or access modifications are eligible for a Fannie Mae Home Styleâ Renovations product using the Community HomeChoice underwriting guidelines described below, except that the maximum loan-to-value ratio for a combined purchase-rehabilitation mortgage is

97 percent of (1) the sum of the purchase price and the cost of improvements, or (2) the estimated as-completed value of the property, whichever is less.

Loan-to-Value Ratios

For purchase transactions, the maximum loan-to-value ratio is 97 percent based on the lesser of the sales price or appraised value.  The cost of the work to be completed and financed by the mortgage may not exceed

50 percent of the property’s appraised value after completion, provided the appraised value of the property fully supports the total acquisition plus rehabilitation costs.

 Combined Loan-to-Value Ratios

Subordinated financing is typically used to supplement a borrower’s contribution to the down payment and closing costs.  When this results in a combined loan-to-value (CLTV) over 97 percent, the subordinate financing must have grant-like terms, and the CLTV ratio may not exceed 105 percent.

Subordinate financing can be used for accessibility modifications.  The maximum CLTV is 120 percent.  For CLTVs in excess of 105 percent, the borrower’s obligation under the subordinate financing must be forgivable over time.


Qualifying Ratios

The maximum single qualifying underwriting ratio is 45 percent for the total expense-to-income ratio, except in the following situations:

  • The maximum ratio is 43 percent, when there is a temporary interest rate buydown.
  • The maximum ratio is 50 percent when the borrower is qualified using a budget-based worksheet as specified in the Community HomeChoice underwriting.
  • The maximum ratio is 33 percent for the housing expense-to-income ratio, and 38 percent for the total obligations-to-income ratio when there are co-borrowers, and at least one of the co-borrowers is not occupying the property.


In qualifying a borrower, lenders should give special consideration to income from sources other than wages and salaries ─ including public disability benefits (such as SSI and Social Security Disability Insurance ), private disability benefits, state supplemental income payments, Temporary Assistance to Needy Families (TANF), income from special-needs trusts, and Section 8 homeownership vouchers.  Any nontaxable benefit income may be “grossed up” by a factor that reflects the tax savings to the borrower.  Non-income sources of support that are specifically committed to the mortgage payment (such as Medicaid waiver funds that cover room and board for a live-in aide) shall also be included in the borrower’s income.

 If a non-occupant co-borrower (family member or legal guardian only) is a party to the transaction, his or her income and expenses are included in the calculation of debt-to-income ratio, but excluded from the budget-based qualifying process (described below).  The maximum qualifying ratios for occupant co-borrowers is

50 percent, while the maximum combined qualifying ratios for occupant and non-occupant co-borrowers are 33/38 percent.

Budget-Based Qualification Method

When using a single qualifying ratio of 50 percent, the borrower must also be qualified using a budget-based worksheet that evaluates the borrower’s current income, including non-income sources of support, and actual living expenses.  The budget worksheet must demonstrate that the borrower’s income and non-income sources of support are adequate to meet the borrower’s expenses, including the proposed mortgage obligation.  The lender or home-buyer education provider may assist the borrower in completing the budget-based worksheet, which must be approved by the lender.

 Non-income sources of support may include transportation and meal vouchers, social services and other non-cash support from a government or nonprofit agency that meet the disability-related needs of the borrower, allowances for property maintenance and repairs, as well as Medicaid waiver funds that cover room and board for a live-in aide.

 Down Payment

The borrower’s minimum down payment is three percent – based on the lesser of the sales price or appraised value – and the borrower must contribute at least $500 from his or her own funds.  The balance of a borrower’s down payment may come form gifts, grants, or grant-like subordinate financing.  Fannie Mae’s standard requirements for documenting gifts apply.

 Closing Costs

The borrower’s closing costs may be funded in accordance with the requirements for Fannie Mae’s Community Home Buyer’s Program ä mortgages.

Cash Reserves

For a ratio over 41, borrowers are required to have one-month mortgage payment (principal, interest, taxes, and insurance, or PITI) in reserve after closing.  For a ratio over 45, two months’ mortgage payments are required. These reserve funds may come from the borrowers own funds or may be gifted.  The funds can come from a nonprofit organization or a family member. The reserves may be held by the borrower in a verified savings or checking account, or may be maintained in a segregated account held by the nonprofit organization, or by a family member.

 Subordinate Financing

Subordinate financing programs and mortgage documents must comply with Fannie Mae terms for Community Seconds® as stated in the Selling Guide.


Temporary interest rate buydowns not to exceed one-half of one percent for the first three years of the mortgage is permitted.

 Homebuyer Education

Only first-time borrowers must participate in a home-buyer education program. Such education shall consist of face-to-face, individual tutoring or classroom-style workshops, making reasonable accommodations to meet the borrower’s specific disability need.

Home Counselor Online

Home Counselor Online is a Fannie Mae Web-based tool, which links the housing counseling process with the loan process and lenders.  The comprehensive counseling management tool helps counselors determine a borrower’s financial readiness for homeownership using the Affordability Analyzer; assess borrower’s eligibility for a variety of loan products; build nontraditional credit histories, and more. 

 Early Delinquency Counseling

Borrowers must sign an authorization form agreeing to participate in an early delinquency counseling program in the event of default. 

Mortgage Insurance

Individual loan mortgage insurance coverage is required for all mortgages as follows:

  • LTV is 90.01% – 97.00%:    35%
  • LTV is 85.01% – 90.00%:    30%
  • LTV is 80.01% – 85.00%:    25%


For More Information

To learn more about Fannie Mae or CommunityHomeChoice mortgages, visit our business-to-business Web site,  You also can contact your local Fannie Mae Partnership Office listed at

 Or contact one of our regional offices:

Southeastern                  Midwestern                Southwestern                  Western                Northeastern

(404) 398-6000              (312) 368-6200          (972) 773-HOME           (626) 396-5100      (215) 575-1400

Fannie Mae (TTY): 1-877-TTY-HEAR



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